Testing Tuesday

Bernanke spoke last night and we are unlikely to hear from him again until the official meeting next Tuesday. Ben managed to say that interest rates may be too high, unless they are too low – this was not very helpful to anyone and the markets, lacking a clear signal that many thought would come, may have a tough day. Now we need to test what we hope are our new floors: Dow 11,250, S&P 1,300 and Nasdaq 2,300. Oracle’s net jumped 42% but sales were off slightly from expectations (still up 18%) and the stock sold off – this does not happen in hot markets! Europe is down across the board as is Asia except the Nikkei, which tacked on another 285 pts, now back on a bull run where it should break 17,000. Why is Japan doing so well? No oil companies dragging down the markets! The Chinese raised fuel taxes this morning in order to cut consumption. Advanced knowledge of this may have been one of the reasons for yesterday’s decline. It’s all about tomorrow’s inventory report now but this kind of sell-off means an upside surprise is more likely. Toug to play oil in this market but below $60 will give us plenty of short opportunities so I’ll make a list below. ====================================== DELL got a good report and, as I’ve said in the past, can’t go any lower (than $29) so this could be a good time to get the $30s for just .60. GLW has a “secret” new type of glass that is almost ready to go and, whatever it is, I like this company enough to buy on the rumor. I’m going to take the May $30 for $1. OLED tested a bottom nicely yesterday but I’m too nervous about the pre-Fed market to commit just yet. ===================================== Oil Plays – Only if oil opens and stays below $60!!! Valero Rule, Valero Rule, Valero Rule. Did I mention you should follow the Valero Rule? Well you should! Today is an easy day as anything over $60 means don’t short or get out if you are short. Manipulated or not, this may not be the week they are going to let oil slide and you could be very sorry! The entire oil patch is still higher than it was last Tuesday although oil itself is down 8% so there is a lot of room to roll over if oil breaks under $60 and it begins to look less like a firm floor. If the manipulators have any juice left, they will hold the $60 line with all they have so we are looking for a real failure below that, not just 20 or 30 cents! Also keep in mind that making 20% in one day is a lot of money and your entire position could be wiped out by one geopolitical event overnight so always be looking to take good trades in oil off the table! XOM is high on my list as they refuse to believe they are part of the oil sector. The stock took a bounce off the 50 dma at $60.50 but below that it can revisit $59 fast. The $60 puts are $1 and can be quickly sold if oil breaks back up (and should be!). SU should go directly down in proportion to the price of oil but, below $55 they will accelerate downward as the economies of sand oil become stressed. That fear may drive put pricing up so I like the $70 puts for $2.20. BP looks problematic but trades mainly in Europe so you are very much susceptible to overnight moves but the $70 puts are cheap at $2.10 for such a volatile stock. You could even insure these with the $70 calls for $1.15 but below $68.50 this stock has a clear run down to $66.25. After being jacked up all week into options to avoid letting holder come in $10 in the money like they were 2 Fridays ago, CVX is now out of gas. Although the p/e of the company is just 8.67, if COP (6.32) can go down, then they can go down too! The $55 puts at .55 are a good cheap bet but remember .75 would be a huge gain! Cramer just pumped MUR last night so this may be a great day to pick up a bargain put! Not for the feint of heart but the $45 puts should come in under $1 which is a nice pick up. I wish CHK hadn’t gone down so fast but they are about to fall off a cliff if the momentum keeps up so the $30 puts are a slow buy in for me at $1 in case they bounce off the 200 dma at $30. Do not short HAL as we just approved another $91Bn for them to overbill us with! SLB, on the other hand, doesn’t have a former CEO who hangs with the President and you will now see the real difference that relationship will make! It may seem $3 cheaper in premium to buy the $120 puts for $4 thant the $115 puts for $2.25 but at $115 the $120 puts will move to $6.70 (up 67%) while the $115 puts would move to $4 (up 85%). On the downside they would both lose about 1/2 their value on a $5 move (assuming no time deterioration of course). Drillers are tricky because E&P spending should be up this year so their fundamentals are gret but maybe not so great as to be worth double what they were last year… If RIG and RDC, the best of the group go down, then I will play DO, which has a p/e of 42, double the group average so the $80 puts look just right even at $3.50. The 50 dma is $79 so look for this critical cross. UPL went down from $60 so fast that we now have to settle with the $55 puts for $2.20 but the 200 dma is way down at $49.